Sometimes learning about stocks is about reading what stock is going to be promoted on websites that launch short squeezes or promote momentum.
The far more productive way to research stocks, though, is to read the transcripts of conference calls, something that begins in earnest this week. You can learn so much about segments and about the world's economies, enough to be able to inform a worldview for the next three to six months.
Let me use some examples from three different bank stock earnings to help you understand what to look for when you are doing the raw research about what drives segments -- important for ETFs -- and individual stocks, increasingly important for those who pick individual stocks. I preface this by saying that some or even many of these insights may be known by some of you. I just think it is important to try to synthesize them into a mosaic that can provide the backdrop that can explain things and inform decisions you make about your portfolio.
I am choosing to highlight just three presentations: JPMorgan Chase (JPM) , Wells Fargo (WFC) and Citigroup (C) .
First, the consumer continues to de-leverage at an extraordinary pace. The ramifications of this decline in borrowing are extraordinary. Millions of individual families have more than enough to take care of their everyday needs. That means that discretionary spending should be way up. It's not, though, because people can't go out and, more important, they can't travel. The price of traveling, especially airline tickets, has been, in retrospect, phenomenally taxing.
So where is the money going, including the stimulus checks? Depends on the incomes of individuals. Forty percent of American's make $15 an hour of less. Those people are not able to save much if at all.
But those who make more than that? Right now their balance sheets are strong so that you have to believe billions of dollars are headed into the stock market.
Second, the amount of money these banks have to spend on technology is extraordinary. All the banks want to trim branches and cut the number of people who work for them in order to be more efficient in part because that's really the best way for them to make money right now. Interest rates are too low to make a lot of money on their money. There's only so much lending that can occur give the Covid-induced chaos. The amount of money spent on cybersecurity is immense. Given that these companies are on premises but probably want to be more in the cloud you need a cybersecurity company that can do both. Hence, the incredible earnings we are seeing from some of these companies including Palo Alto Networks (PANW) .
Third, the banks themselves are doing so well and could do even better if the federal government would go lighter now that we have seen we can have a growing economy even with Covid. As Jamie Dimon put it: "We have so much capital we can't use it." That, to me, means don't sell the banks yet. No, the fintechs aren't going to lose their adherents. Dimon said his bank is scared expletive deleted about Visa (V) , Mastercard (MA) and Paypal (PYPL) , among others, if only just because the stock market valuations.
Ultimately I can only believe that when the vaccine is finally nationwide we are indeed going to see more money directed toward going somewhere, anywhere, but as long as the vaccine rollout continues to be bungled, I think there's more money headed to the stock market or sitting in banks doing nothing, nothing at all, something that is slowing the economy in its own right.
(JPMorgan Chase, Wells Fargo and Mastercard are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
